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Polar Vortex = Strong Demand

How Should Customers Respond to The Winter 2014 Electricity Price Spikes? October 8, 2014 Ron Aberizk Sr. Sales Manager, Direct – Upstate NY. Polar Vortex = Strong Demand. Jan 2014 GWHDDs = 1048 GWHDD 10YA = 931 15 th coldest since 1950. Feb 2014 GWHDDs = 883 GWHDD 10YA = 796

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Polar Vortex = Strong Demand

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  1. How Should Customers Respond to The Winter 2014 Electricity Price Spikes?October 8, 2014 Ron Aberizk Sr. Sales Manager, Direct – Upstate NY

  2. Polar Vortex = Strong Demand Jan 2014 • GWHDDs = 1048 • GWHDD 10YA = 931 • 15th coldest since 1950 Feb 2014 • GWHDDs = 883 • GWHDD 10YA = 796 • 8th coldest since 1950 • Impact on energy markets: • New York spot price spiked for natural gas and electricity • NYMEX spot natural gas increased to 5-year highs (One month forward) Persistent, large-scale cyclone (intense area of low pressure) located near both poles. Stronger in the winter. Associated with extreme cold, but typically reside near/within the Arctic/Antarctic.

  3. Jan14 NYISO Gas/Power Prices Increased West to East Western zones had lower gas/power prices due to lower consumption and less gas constraints Western Zones have more coal/hydro than east Eastern zones had Higher gas/power prices due to higher consumption and gas constraints Zone F can deliver power to ISO-NE Zone F & ISO-NE prices highly correlated

  4. Daily NYISO Average Costs/MWh 2014 LBMP Average Cost/ MWH 2013 LBMP Average Cost/ MWH

  5. NYISO Zone A vs. Dominion South Port

  6. NYISO Zone G vs. Tennessee Zone 6

  7. NYISO Regional Issues • NYISO set new peak records • New, all-time record peak set July 9, 2013 - 33,956 MW • New winter peak reached in January 7, 2014 - 25,738 MW • Peak demand expected to outgrow electrical usage • over next 10 years • Peak demand projected to grow at average annual rate of 0.83% • Overall usage forecast to grow at average annual rate of 0.16% • Power plant retirements outpaced additions • Resource margins remain positive, however . . . • Surplus went from 5,000 MWs in 2012 to 1,900 MWs in 2014 • New York moving to diversify generation, but gas rules! • 2013 - 46% electric generation fueled by duel fuel (gas&oil) • More than 70% of proposed power projects would be fueled by gas

  8. NYISO Reliability Concerns Reflected in Capacity Prices NYISO

  9. NYISO Generation Addition and Removal • Selkirk Units 1&2 notice of mothballing withdrawn 9/14 • + 348MW • Danskammer back to service • + 494MW • Total 842MW • 527MW Deficiency

  10. Weather Outlook – This Or ? NWS Dec-Feb ABOVE Normal Temps Northern U.S. NOAA; NWS 7

  11. Farmer’s Almanac- Winter 2014-2015

  12. Response • Know your objectives and risk tolerances/ Quick Reactions • Gas pipeline situation unchanged from last winter • Upside risk greater than downside • Weather “risk” premiums may only diminish closer in • Power – potential transmission/capacity increases • Energy Budget Strategy should include: • Ability to act quickly if gas/power price decline or increase above budget targets 7

  13. QUESTIONS ?

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